Founders preparing for a sale tend to focus on the obvious housekeeping – contracts, disputes, the cap table. A second set of questions, around employee ownership, data compliance and insurance, surfaces just as reliably in diligence, and catches founders unprepared just as often.
A few places where that second set of questions tends to land.
Share schemes built without an exit in mind
Most employee share schemes exist to retain and incentivise people, not to anticipate a future sale. Vesting on exit, leaver provisions and dilution mechanics often need a second look once a sale is realistically on the table. Check the scheme document itself rather than assuming how it should work.
How the scheme is taxed on exit
Employee share schemes carry specific tax treatment on exit, and that treatment affects what employees actually take home – which affects morale through a deal process that’s already unsettling for a team. Model this before deal terms are finalised, not explain it to employees afterwards.
What the scheme document should actually say
A scheme document needs to address what happens to unvested shares on different kinds of exit – resignation, retrenchment, change of control usually trigger different outcomes. A document that’s silent or vague on this becomes a negotiation problem exactly when there’s no time to resolve it cleanly.
POPIA compliance is now a standard diligence line item
Buyers want to see personal information processed lawfully, an information officer appointed where required, and a documented breach response. A business that’s never formally addressed this is disclosing a gap at exactly the wrong moment.
Cross-border data transfer
Where personal information moves across borders – to a foreign buyer’s systems after acquisition, or as part of existing operations – POPIA imposes specific conditions. Confirm compliance before it becomes a warranty you’re asked to give without having checked it.
Insurance the law already requires
Certain categories of business insurance are mandated depending on the nature of the business. A gap here is a simple, checkable item, and it reflects worse on you if a buyer finds it than if you disclose it yourself. Confirm it as part of general deal-readiness housekeeping.
Warranty and indemnity insurance
W&I insurance shifts the risk of a warranty claim from founder to insurer, which can reduce post-completion exposure and the size of any escrow the buyer insists on. Raise this early in deal structuring, not once terms are largely settled.
Merger notification catches smaller deals too
Competition law notification thresholds catch more transactions than founders expect. A deal needing Competition Commission notification has a defined approval timeline, and it needs to sit in the deal schedule from the start, not surface as a surprise near signature.
A practical way to use this
Employee ownership, data compliance and insurance are all checkable, fixable items given enough lead time – which is exactly why they belong in a deal-readiness review well before a buyer’s diligence team starts asking.
The questions that derail a deal late are rarely the ones founders expected. They sit just outside the obvious housekeeping list, which is exactly why they’re worth checking before someone else finds them first.
